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2016 (10) TMI 216 - AT - Income TaxRevision u/s 263 - as per Commissioner Assessing Officer has failed to initiate penalty proceedings under section 271(1)(c) of the Act on the addition of ₹ 2,20,72,000/- to the total income - Held that - In the case Addl. CIT v. J.K. D Costa 1981 (4) TMI 68 - DELHI High Court it has been held that if the Commissioner finds, while examining the records of an assessment order under section 263, that the Assessing Officer has not initiated penalty proceedings, he cannot direct initiation of penalty proceedings because penalty proceedings are not a part of assessment proceedings. The Commissioner cannot pass an order under section 263 pertaining to penalty. The direction of the Commissioner to initiate penalty proceedings under section 271(1)(c) of the Act while setting-aside the assessment requires to be cancelled. - Decided in favour of assessee
Issues Involved:
1. Jurisdiction under Section 263 of the Income Tax Act, 1961. 2. Validity of the assessment order being termed as erroneous and prejudicial to the interests of the Revenue. 3. Failure to initiate penalty proceedings under Section 271(1)(c) of the Act. Issue-wise Detailed Analysis: 1. Jurisdiction under Section 263 of the Income Tax Act, 1961: The Commissioner of Income Tax (CIT) exercised supervisory jurisdiction under Section 263 of the Act, deeming the assessment order dated 26.12.2011 for the assessment year 2009-10 as erroneous and prejudicial to the interests of the Revenue. The CIT issued a show-cause notice on 07.03.2014, highlighting discrepancies and lack of proper verification in the assessment order. 2. Validity of the Assessment Order: The assessment order under Section 143(3) was scrutinized by the CIT, who noted that the Assessing Officer (AO) made additions based on revised returns and details of creditors in the Balance Sheet. The CIT found that the AO did not properly verify and reconcile the details, leading to a hasty and incomplete assessment. Specific discrepancies included mismatches in confirmations of advances against land and improper examination of figures like "Advance for land" and "Closing WIP" on the asset side of the Balance Sheet. The CIT concluded that the AO failed to carry out necessary verifications, making the assessment erroneous and prejudicial to the interests of the Revenue. 3. Failure to Initiate Penalty Proceedings under Section 271(1)(c): The CIT also noted that the AO did not initiate penalty proceedings under Section 271(1)(c) for additions made to the total income, which were considered as filing inaccurate particulars of income. The Tribunal examined whether the CIT could set aside the assessment for the AO's failure to initiate penalty proceedings. The Tribunal referred to multiple judicial precedents, including decisions from the Delhi High Court and the Supreme Court, which held that the CIT cannot direct the initiation of penalty proceedings under Section 263 as penalty proceedings are separate from assessment proceedings. The Tribunal followed the ratio of these decisions, concluding that the CIT's direction to initiate penalty proceedings was beyond the scope of Section 263. Conclusion: The Tribunal partially allowed the appeal, setting aside the CIT's direction to initiate penalty proceedings under Section 271(1)(c) but upheld the CIT's observation that the assessment was completed in haste and without proper verification, making it erroneous and prejudicial to the interests of the Revenue. Order Pronounced: The appeal of the assessee was partly allowed on 17th August 2016.
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